Zinox Takes Over Konga: Is This a Good Deal for Konga?

Another interesting M&A deal occurred during the weekend in Nigeria. Zinox group, an important Original Equipment Manufacturer (OEM), took over Konga, a popular Nigerian e-commerce service.

This Day reports that the deal was concluded after months of negotiations between Zinox and Konga’s major shareholders, Naspers and Kinnevik. And it would see Zinox assume ownership of Konga, the e-commerce company; KongaPay, its mobile payment platform; and KOS-Express, Konga’s logistics venture.

This would be Zinox’s second foray into the online marketplace business. It had originally pioneered the sector 12 years ago, when it founded Buyrightafrica.com. But that adventure was billed to fail; primarily because Nigeria was not ripe for it, and possibly due to that terrible company name.

What’s the future of Yudala?

Zinox owns Yudala, a competing e-commerce website. It is the third biggest e-commerce website in Nigeria. But contrary to what would have been expected, Yudala will not be merged with Konga. Zinox wants both companies to run separately.

Yudala already seems to be a somewhat huge business, with a strong offline presence. But it’s not profitable. And as the last big player in the e-commerce space, it is vulnerable to all the hiccups of that sector. And worse still, it won’t be profitable until 2020, according to its owners.

But with the cash expenses, would it be wise to keep spending on Yudala? It would definitely be more appealing and reasonable if more attention is focused on making Konga profitable in the long run.

Can Zinox make Konga and Nigerian e-commerce grow?

It’s been a long time since brands like Jumia and Konga first entered the Nigerian e-commerce space. However, the sector still looks underserved. E-commerce companies grapple with too many challenges and this affects their profitability and valuations.

In 2016, it was revealed that Konga had just about 184,000 users. A very small figure, considering the huge costs it incurs for adverts and other promos.

This is really sobering stuff. In a country of 180m people, Konga has only managed 184,000 active customers pic.twitter.com/sV6BiLvCyn

— tyro (@DoubleEph) July 27, 2016

So it would be interesting to see how Zinox would bring fresh ideas into the industry.

Zinox has been a tech leader in Nigeria for a very long time. It understands the terrain and how the typical Nigerian customer thinks. So its experience overall would be very beneficial to the growth of the industry.

Also important is the fact that this acquisition would free Konga from the possibility of foreign shareholders forcing it to make counter-intuitive decisions for the sake of revenue. In November last year, Konga laid off 60% of its workforce and followed that up with by stopping a host of features, such as pay on delivery, and maintaining warehouses for its goods.